Combs v. Stokes

IN THE COURT OF APPEALS OF TENNESSEE
FILED
ALLAN COMBS, et al., ) C/A NO. 03A01-9701-CV-00022
) July 22, 1997
Petitioners-Appellees, )
) Cecil Crowson, Jr.
) Appellate C ourt Clerk
v. )
)
)
BILLY J. STOKES, Commissioner ) APPEAL AS OF RIGHT FROM THE
of the Tennessee Department of ) SULLIVAN COUNTY CHANCERY COURT
Employment Security, )
)
Respondent-Appellee, )
)
and )
)
HOLSTON DEFENSE CORPORATION, )
) HONORABLE RICHARD E. LADD,
Respondent-Appellant. ) CHANCELLOR
For Appellant For Appellees Combs, et al.
CHERIE S. ADAMS D. BRUCE SHINE
Wilson, Worley & Gamble, P.C. DONALD F. MASON, JR.
Kingsport, Tennessee Shine & Mason
Kingsport, Tennessee
EVERETT H. MECHEM
Holston Defense Corporation For Appellee Stokes
Kingsport, Tennessee
JOHN KNOX WALKUP
Attorney General & Reporter
SANDRA E. KEITH
Office of the Attorney General
Nashville, Tennessee
OPINION
REVERSED AND REMANDED Susano, J.
1
This is an unemployment compensation case. Holston
Defense Corporation (HDC) appeals the trial court’s determination
that 29 of its former employees (“the Petitioners”) are entitled
to receive full unemployment benefits with no offset for pension
benefits. HDC raises one issue which presents the following
question for our review:
Does T.C.A. § 50-7-303(a)(8)(1) require the
offset of Petitioners’ pension funds against
their unemployment compensation benefits,
where petitioners elected to “roll over”
their pension funds into individual
retirement accounts?
Having determined that T.C.A. § 50-7-303(a)(8)(1) does require
the offset of company-funded pension benefits against a
claimant’s unemployment compensation under such circumstances, we
reverse.
I
The material facts are not in dispute. In 1993, HDC
implemented a program to reduce its work force, in which it
offered all of its employees the opportunity to voluntarily
terminate their employment in exchange for various incentives.
HDC announced that if fewer than the required number of employees
opted for voluntary termination, some employees would be
terminated involuntarily. Each of the Petitioners chose
voluntary termination.
Upon termination of their employment, the Petitioners
received incentive pay and other benefits, including a choice
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between either a lifetime annuity payment or the distribution of
their accrued pension funds, which had been furnished entirely by
HDC. If they elected a present distribution of those funds, as
opposed to an annuity, they had the further choice of a lump-sum
payment that they could do with as they pleased, or a “roll over”
of those funds into an individual retirement account (IRA). Each
petitioner chose the latter option, primarily to avoid the tax
consequences of the former.
The Petitioners subsequently applied to the Tennessee
Department of Employment Security (the Agency) for unemployment
compensation benefits. The Agency’s subsequent award of benefits
to the petitioners was upheld by its Appeals Tribunal. HDC then
appealed the Appeals Tribunal’s decision to the Agency’s Board of
Review, which held that, although the Petitioners were otherwise
eligible for unemployment compensation benefits, T.C.A. § 50-7-
303(a)(8)(1) required that those benefits be offset by the
prorated weekly amounts of their employer-funded pensions. That
decision, however, was reversed by the trial court, which held
that the Petitioners were entitled to full unemployment
compensation without any deductions.
II
The relevant Tennessee statute, T.C.A. § 50-7-303(a),
provides, in pertinent part:
DISQUALIFYING EVENTS. A claimant shall be
disqualified for benefits:
* * *
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(8)(1) For any week with respect to which a
claimant is receiving or is entitled to
receive a pension... under a plan maintained
or contributed to by a base period or
chargeable employer as follows: The weekly
benefit amount payable to such claimant for
such week shall be reduced (but not below
zero):
(A) By the entire pro-rated weekly amount of
the pension if one hundred percent (100%) of
the contributions to the plan were provided
by a base period or chargeable employer; and
(B) By no part of the pension if any
contributions to the plan were provided by
such claimant.
* * *
(5) For purposes of this subdivision (a)(8),
an individual shall be deemed entitled to
receive a pension if a determination has been
made by appropriate officials of such
individual’s vested right to a pension for
any week in which such individual is entitled
to receive benefits under this chapter;...
T.C.A. § 50-7-303(a).
In order for a state to receive federal certification
and funding for its unemployment compensation program, it must
first meet certain minimum standards set forth in the Federal
Unemployment Tax Act (FUTA), 26 U.S.C.A. § 3301, et seq. See
Watkins v. Cantrell, 736 F.2d 933, 937 (4th Cir. 1984); Cabais v.
Egger, 690 F.2d 234, 235-36 (D.C. Cir. 1982). For example, the
FUTA requires that any pension funds received by a claimant be
offset against his or her unemployment compensation benefits. 26
U.S.C.A. § 3304(a)(15). Tennessee’s corresponding offset
provision, quoted above, is broader than that of the federal
statute. See T.C.A. § 50-7-303(a). However, it has been widely
held that the FUTA establishes only the minimum requirements for
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the offset of pension benefits; for instance, the Cabais court
stated:
Section 3304(a)(15)... reflects only the
minimum conditions under which deduction must
be required by State law for certification
under FUTA. Although a State may broaden the
scope of its deduction of pension payments
beyond the conditions in which deduction is
required under the Federal law, it may not
adopt less stringent conditions which fall
short of the Federal requirement.
Cabais, 690 F.2d at 242-43. See also Watkins, 736 F.2d at 939
(states can enact broader offset provisions than those mandated
by 26 U.S.C.A. § 3304(a)(15)); Bleau v. Hackett, 598 F. Supp. 727,
733 (U.S.D.C. R.I. 1984) (“... the Secretary of Labor has
consistently interpreted § 3304(a)(15) as setting only minimum
offset requirements.”) We hold that T.C.A. § 50-7-303(a)(8)(1)
is not in conflict with the federal statute.
We are required to employ the same standard of review
used by the trial court when it examined the Board of Review’s
decision. Armstrong v. Neel, 725 S.W.2d 953, 955 n.1 (Tenn.App.
1986). Under that standard, we may
...reverse, remand or modify the decision if
the rights of the petitioner[s] have been
prejudiced because the [trial court’s]
findings, inferences, conclusions or
decisions are:
(A) In violation of constitutional or
statutory provisions;
(B) In excess of the statutory authority of
the agency;
(C) Made upon unlawful procedure;
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(D) Arbitrary or capricious or characterized
by abuse of discretion or clearly unwarranted
exercise of discretion; or
(E) Unsupported by evidence which is both
substantial and material in the light of the
entire record.
T.C.A. § 50-7-304(i)(2)(Supp. 1996).
III
HDC and the Agency argue that the language of T.C.A. §
50-7-303(a)(8)(1) clearly requires that the Petitioners’
unemployment compensation be reduced by the prorated amount of
their pension funds. They contend that the Petitioners fell
within the statute’s definition of entitlement to receive pension
funds, and that the legislature anticipated this type of delayed
receipt of pension benefits when it included the language
“receiving or... entitled to receive” in the statute. T.C.A. §
50-7-303(a)(8)(1) (emphasis added). HDC and the Agency point out
that the legislature provided no special exemption for any
particular disposition of pension funds made by a claimant
entitled to such funds.
The Petititoners, on the other hand, argue that they
did not “receive” the pension benefits, but instead merely
transferred the funds while maintaining their “status quo”. They
point to language in the Agency’s manual, which states that a
pension roll-over into an IRA is considered a “delay of pension,”
and that benefits may not be reduced where a claimant is merely
“eligible for” pension benefits (as opposed to “entitled to
6
receive” them). We find these contentions to be without merit.
In the first place, the Petitioners were entitled to their
pension benefits, when they elected to transfer them into IRAs.
Secondly, to the extent that the Agency manual contradicts the
clear language of the statute, it carries no authority, and the
statute must control.
The Petitioners also cite various documents issued by
the United States Department of Labor to support their position.
One such document, entitled “Unemployment Insurance Program
Letter No. 22-87," draws a distinction, as does the Agency
manual, between “eligibility for” and “entitlement to” pension
benefits. As previously noted, we believe that the Petitioners
were entitled to their pension benefits; this distinction,
therefore, is of no consequence under these circumstances. The
document also refers to situations in which pension benefits,
having been deemed “constructively” received, are offset against
unemployment benefits, but are never actually received. This
language does not apply to the facts of our case. The benefits
were, in fact, received when they were rolled over into IRAs.
The other Department of Labor documents cited by the
Petitioners include a letter to the Agency’s Commissioner and a
subsequent Unemployment Insurance Program Letter, each of which
indicate that a state is not required to offset, against
unemployment compensation, pension funds that are “rolled over”
into an IRA. These documents, however, beg the question, for as
noted earlier, the FUTA sets forth only minimum conditions under
which a state must require such deductions. States are free to
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require the offset of pension funds under much broader
circumstances -- including where such funds are “rolled over”
into an IRA -- than those mandated by the federal act.
Therefore, our statute’s mandatory deduction of pension payments
from a claimant’s unemployment benefits is not inconsistent with
the federal law. Accordingly, we find the Petitioners’
contentions to be without merit.
We are therefore left with a straightforward question
of statutory interpretation. Where, as in this instance, the
subject statute is unambiguous, “we need only enforce the statute
as written.” In re Conservatorship of Clayton, 914 S.W.2d 84, 90
(Tenn.App. 1995). The statute clearly states that a claimant’s
benefits shall be reduced for any week in which he or she is
receiving or is entitled to receive a pension. T.C.A. § 50-7-
303(a)(8)(1). The Petitioners fell squarely within this
provision. They were “entitled to receive” their pension
benefits when they made the decision to take a lump-sum
distribution rather than an annuity. Furthermore, they, in
effect, received those funds when they were rolled over into
their own retirement accounts. The Petitioners cannot circumvent
the statute by means of this voluntary choice; nor can they rely
upon a statutory exception that does not exist. We therefore
hold, under the standard of T.C.A. § 50-7-304(i)(2)(A), that the
trial court’s decision is contrary to the offset provisions
contained in our statute. Under the facts before us, T.C.A. §
50-7-303(a)(8)(1) does require the offset of Petitioners’ pension
funds against their unemployment compensation.
8
The judgment of the trial court is reversed and the
petitions dismissed at the petitioners’ cost. Costs on appeal
are assessed against the Petitioners. This case is remanded to
the trial court for the collection of costs on the proceedings
below, pursuant to applicable law.
__________________________
Charles D. Susano, Jr., J.
CONCUR:
_________________________
Houston M. Goddard, P.J.
_________________________
William H. Inman, Sr.J.
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